AUDIT REPORT ON THE ACCOUNTS OF DISTRICT GOVERNMENT KHUSHAB AUDIT YEAR 2017-18 AUDITOR GENERAL OF PAKISTAN TABLE OF CONTENTS ABBREVIATIONS & ACRONYMS.......................................................... i PREFACE ...................................................................................................... ii EXECUTIVE SUMMARY......................................................................... iii SUMMARY TABLES AND CHARTS ................................................... vii Table 1: Audit Work Statistics ...................................................... vii Table 2: Audit observation regarding Financial Management .... vii Table 3: Outcome Statistics ........................................................... vii Table 4: Irregularities Pointed Out ............................................... viii Table 5: Cost-Benefit .................................................................... viii CHAPTER-1 .................................................................................................. 1 1.1 District Government, Khushab .................................................. 1 1.1.1 Introduction of Departments ...................................................... 1 1.1.2 Comments on Budget and Accounts (Variance Analysis) ...... 1 1.1.3 Brief comments on the status of MFDAC Audit Paras of Audit Report 2016-17 ................................................................ 3 1.1.4 Brief comments on the status of compliance with PAC Directives .................................................................................... 3 1.2 AUDIT PARAS .................................................................................... 5 1.2.1 Non Production of Record ......................................................... 6 1.2.2 Irregularities / Non-compliance................................................. 7 1.2.3 Internal Control Weaknesses ................................................... 14 1.2.4 Performance .............................................................................. 24 ANNEXURES .............................................................................................. 25 Annexure-A ........................................................................................... 26 Annexure-B ........................................................................................... 39 Annexure-C ........................................................................................... 40 Annexure-D ........................................................................................... 42 Annexure-E ........................................................................................... 43 Annexure-F............................................................................................ 44 Annexure-G ........................................................................................... 48 Annexure-H ........................................................................................... 49 Annexure-I ............................................................................................ 50 ABBREVIATIONS & ACRONYMS ACL Audit Command Language AIR Audit & Inspection Report DAC Departmental Accounts Committee DDO Drawing & Disbursing Officer DCO District Coordination Officer DO District Officer DHQ District Headquarter DTL Drug Testing Laboratory EDO Executive District Officer FCR Final Completion Report F&P Finance and Planning HSRP Health Sector Reforms Programme LP Local Purchase MFDAC Memorandum for Departmental Accounts Committee MRS Market Rate System MS Medical Superintendent SMO Senior Medical Officer TST Triple Surface Treatment NAM New Accounting Model OFWM On Farm Water Management PAC Public Accounts Committee PAO Principal Accounting Officer PCC Pakka Cement Concert PFR Punjab Financial Rules PLGO Punjab Local Governments Ordinance POL Petroleum Oil & Lubricants PPRA Punjab Procurement Regulatory Authority RHC Rural Health Centre SDA Special Deposit Account THQ Tehsil Headquarter WUA Water User Association i PREFACE Articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan, 1973 read with Sections 8 and 12 of the Auditor General (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001 and Section 115 of the Punjab Local Government Ordinance, 2001 require the Auditor General of Pakistan to audit the accounts of the Provincial Governments and the accounts of any authority or body established by, or under the control of, the Provincial Government. Accordingly, the Audit of all Receipts and Expenditures of the District Government Fund and Public Account of District Government is the responsibility of the Auditor General of Pakistan. The report is based on audit of the accounts of various offices of the District Government, Khushab for the Financial Year 2016-17. The Directorate General of Audit District Governments, Punjab (North), Lahore, conducted audit during 2017-18 on test check basis with a view to reporting significant findings to the relevant stakeholders. The main body of the Audit Report includes only the systemic issues and significant audit findings. Relatively less significant issues are listed in the Annexure-A of the Audit Report. The Audit observations listed in the Annexure-A shall be pursued with the Principal Accounting Officer at the DAC level and in all cases where the PAO does not initiate appropriate action, the Audit observation will be brought to the notice of the Public Accounts Committee through the next year’s Audit Report. The audit results indicate the need for adherence to the regularity framework besides instituting and strengthening internal controls to prevent recurrence of such violations and irregularities. The observations included in this Report have been finalized after discussion of Audit paras with the management. However, no Departmental Accounts Committee meeting by PAO was convened despite repeated requests. The Audit Report is submitted to the Governor of the Punjab in pursuance of Article 171 of the Constitution of the Islamic Republic of Pakistan, 1973 to cause it to be laid before the Provincial Assembly of Punjab. Islamabad (Javaid Jehangir) Dated: Auditor General of Pakistan ii EXECUTIVE SUMMARY The Directorate General Audit, District Governments, Punjab (North), Lahore, is responsible to carry out the Audit of District Governments, Tehsil / Town Municipal Administrations and Union Administrations of three City District Governments and sixteen District Governments. Its Regional Directorate of Audit, Sargodha has audit jurisdiction of District Governments, TMAs and UAs of four District Governments i.e. Sargodha, Khushab, Mianwali and Bhakkar. The Regional Directorate has a human resource of 11 officers and staff, total 2,739 man days and the annual budget of Rs 14.220 million for the Financial Year 2017-18. It has mandate to conduct Financial Attest Audit, Regularity Audit and Compliance with Authority & Performance Audit of entire expenditure including programmes / projects & receipts. Accordingly, RDA Sargodha carried out Audit of accounts of District Government Sargodha for the Financial Year 2016-17. The District Government, Khushab conducts its operations under Punjab Local Government Ordinance, 2001. It comprises one Principal Accounting Officer (PAO) i.e. the District Coordination Officer (DCO) covering six groups of offices i.e. Agriculture, Community Development, Education, Finance & Planning, Health and Works & Services. The financial provisions of the Punjab Local Government Ordinance, 2001 require the establishment of District Government Fund comprising Local Government Fund and Public Account for which Annual Budget Statement is authorized by the Nazim / Council / Administrator in the form of budgetary grants. Audit of District Government, Khushab was carried out with a view to ascertaining whether the expenditure was incurred with proper authorization, in conformity with laws / rules / regulations for economical procurement of assets and hiring of services etc. Audit of receipts / revenues was also conducted to verify whether the assessment, collection, reconciliation and allocation of revenues were made in accordance with laws / rules, resulting in no leakage of revenue. iii a. Scope of Audit Out of total auditable expenditure of Rs 2,699.591 million of the District Government, Khushab for the Financial Year 2016-17 covering one PAO and 134 formations, the Regional Directorate of Audit, audited an expenditure of Rs 755.885 million which, in terms of percentage, was 28% of auditable expenditure. The RDA planned and executed audit of 35 formations i.e. 100% achievement against the planned audit activities. Total receipts of the District Government, Khushab for the Financial Year 2016-17, were Rs 4.351 million, whereas, RDA audited receipts of Rs 1.697 million which was 37% of total receipts. b. Recoveries at the Instance of Audit Recovery of Rs 62.055 million was pointed out, which was not in the notice of executive before audit. However, no recovery was affected till compilation of this report. c. Audit Methodology The audit year 2017-18 witnessed intensive application of desk audit techniques in this directorate. This was facilitated by access to live SAP/R3 data, internet facility, and availability of permanent files. Desk review helped auditors in understanding the systems, procedures, and environment, and the audited entity before starting field activity. This greatly facilitated in the identification of high risk areas for substantive